## Facts

- Mineral owners holding only a 1/80 undivided mineral interest in a 922-acre tract executed an oil and gas lease to the lessee in 1947.
- The lease used a printed form stating a landwide royalty of “one-eighth of the oil produced and saved from said land.”
- The printed proportionate reduction clause was stricken before execution.
- The transaction’s economic terms reflected the lessors’ fractional ownership: bonus and delay rentals were calculated on 11.52 acres (1/80 of 922 acres), not on the full tract.
- Production was obtained during the primary term.
- The lessors refused to sign division orders and rejected royalty payments calculated as 1/80 of the stated 1/8 royalty.
- The lessors claimed they were entitled to a full 1/8 of total production from the entire tract based on the royalty clause and the deletion of proportionate reduction language.

## Issues

1. Whether a lessor owning only a 1/80 mineral interest is entitled, under a lease reserving “one-eighth” royalty and deleting the proportionate reduction clause, to 1/8 of total tract production or only 1/80 of the 1/8 royalty.
2. Whether striking the proportionate reduction clause enlarges the lessor’s royalty beyond the mineral interest actually leased.

## Decision

- The appellate court affirmed judgment for the lessee.
- The court held the lessors were entitled only to 1/80 of the 1/8 royalty (i.e., royalty proportional to their 1/80 mineral ownership).
- The court concluded the lease was unambiguous when read as a whole.
- The court rejected the argument that deleting the proportionate reduction clause converted a lease of a 1/80 interest into an entitlement to 1/8 of production from all interests in the tract.
- The court distinguished authority relied on by the lessors as involving materially different transactions and fractional-interest structures.

## Legal Principles

- A royalty reserved in an oil and gas lease is retained out of what the lessor grants; when the lessor leases only a fractional mineral interest, the royalty is ordinarily measured from that fractional interest.
- A lease must be construed from its four corners, giving effect to the instrument as a whole rather than isolating standard-form phrases.
- Striking a proportionate reduction clause does not, without clear language, expand the lessor’s economic interest beyond what the lessor owns and conveys; it merely removes an express contractual mechanism for reduction.
- Courts avoid constructions that would award a royalty greatly exceeding the lessor’s actual mineral ownership absent unmistakable contractual language.

## Conclusion

The court held that lessors who owned and leased only a 1/80 mineral interest could not, by relying on a standard 1/8 royalty clause and deletion of the proportionate reduction clause, claim 1/8 of total production from the tract; their royalty remained proportional to their fractional mineral ownership.


Gresham v. Turner, 382 S.W.2d 791 (Tex. Civ. App.—El Paso 1963, writ ref’d n.r.e.)